TAX POLICY:

Wind credit backers floating on the tide of fiscal talks, hoping not to sink

Nick Juliano, E&E reporter

E&E Daily: Monday, December 3, 2012

Just as the passengers on the Titanic could do nothing to avoid that iceberg, supporters of a key wind industry tax break have little control at this point over whether their incentive will continue into next year.

Proponents of the wind production tax credit (PTC) believe they have largely won the argument over the merits of extending it at least through next year -- with a deep, bipartisan bench in both chambers of Congress on board in principle with an extension. But there is little appetite in Congress to address the credit in isolation of the broader suite of tax-and-spending issues collectively known as the "fiscal cliff."

The current scenario leaves wind proponents hoping for the best but realizing there is little they can do to affect their prospects at this stage of the game. Ongoing high-level negotiations between President Obama and House Speaker John Boehner (R-Ohio) -- which did not appear to be going well last week -- will determine whether a fiscal cliff deal can be made.

"The PTC is a mere passenger on the ocean liner that's the fiscal cliff debate," said Josh Freed, vice president for clean energy at the centrist Democratic group Third Way. "That passenger is either going to get to its destination because the ship arrives, or it's going to go down with it."

Although they have little influence over the top-line matter of resolving the fiscal cliff, wind industry lobbyists are continuing to press lawmakers on the details of a PTC extension, sources said last week.

Wind companies are asking for language adopted earlier this summer by the Senate Finance Committee extending the credit for another year to be included in a fiscal cliff deal. The committee made a key modification to the credit's requirements by allowing companies to claim the 2.2-cents-per-kilowatt-hour PTC on any turbines that are under construction by the end of 2013. Current law requires turbines to be placed into service and producing electricity before claiming the credit.

Because wind projects take at least 12 to 18 months to get off the ground, by changing the credit trigger from "in service" to "under construction," the finance package essentially amounts to a two-year extension of the credit.

"We believe we have the bipartisan support to get the job done, and it's been clear for some time that it will be done in the context of a comprehensive package that may take until the end of the year," said Ellen Carey, a spokeswoman for the American Wind Energy Association. "The Senate Finance Committee made the right decisions in the tax extenders package that passed on a bipartisan vote of 19-5 on Aug. 2, and we continue to stress to the negotiators that it's the most effective way of continuing the growth of wind energy and saving 37,000 jobs."

Support for the Senate language remains "tepid" in the House, but lawmakers in the lower chamber are more receptive than when it was unveiled in August, said one wind lobbyist who requested anonymity. And the Finance version maintains strong support among Senate lawmakers from both parties, the source said.

The industry also continues to face calls from lawmakers to flesh out proposals for an eventual phaseout of the PTC. Sen. Chuck Grassley (R-Iowa), one of the industry's strongest supporters, last week said more details on the phaseout would boost the PTC's prospects for an extension. The lobbyist said the industry continues to debate internally over how best to demonstrate that it is serious when it says it will not need the credit forever and is open to it eventually going away.

In addition to the PTC, the Senate Finance Committee's "tax extenders" package addressed several other tax breaks that expired last year or are set to do so at the end of this month, including credits for home weatherization, efficient appliances and alternative fuels. It also included dozens of provisions related to individual and nonenergy business tax breaks. Most of the other extenders also are expected to be included in a broader fiscal cliff package.

Negotiations between Boehner and Obama seemed to hit a wall last week, amid continued sharp disagreements over marginal income tax rates for wealthy people and potential cuts to entitlement programs.

House Republicans on Friday flatly rejected an opening bid from the White House that they described as an unserious rehash of past proposals to increase tax revenue without sufficiently cutting spending.

Boehner on Friday continued to resist increases in top marginal tax rates that the president is demanding and sounded dour on the status of the negotiations.

"There's a stalemate, let's not kid ourselves," Boehner said in a news conference. "Right now we're almost nowhere."

Obama on Friday took his negotiating on the road with a campaignlike stop in Pennsylvania, where he called on Republicans to extend tax rates for individuals and families making less than $200,000 or $250,000 per year, respectively.

It remains to be seen whether the seeming impasse signals truly unresolvable disagreements or whether it is a negotiating posture. Observers remain cautiously optimistic that a resolution will be found before the end of the year. But for now, all renewable energy advocates can do is continue to watch and wait.

"I think it's unfortunate that something with such broad bipartisan, bicameral support is caught up in these much bigger negotiations," said Richard Caperton, director of clean energy investment at the liberal Center for American Progress.

"It's clear that it's not about the PTC," he added. "The PTC is hardly a sticking point here; it's about much larger things."

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